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(Solved): The following payoff table shows the profit for a decision problem with two states of nature and two ...
The following payoff table shows the profit for a decision problem with two states of nature and two decision alternatives. (a) Suppose
P(s_(1))=0.2and
P(s_(2))=0.8. What is the best decision using the expected value approach? The best decision is
|with an expected value of 6. .: found in part (a) optimal. As long as the payoff for
s_(1)under
d_(1)is 6.2 X , then the solution found in part (a) will be optimal. As long as the payoff for
s_(2)under
d_(1)is , then the solution found in part (a) will be optimal. Is the solution more sensitive to the payoff under state of nature
s_(1)or
s_(2)?
S_(1)
S_(2)